Experience level: 
Intended Audience: 
Norman S. Tanchingco, PhD., Ma. Regina M. Hechanova, PhD.


Organizations thrive in an environment that fosters the spirit of creativity and innovative work. This happens within a work culture that accepts and nurtures ingenuity, new thinking, and creative problem solving and creativity. Using the lens of the Self-Determination Theory, the study aimed to understand the relationship of leadership and innovation culture through organizational mechanisms that support the psychological needs of autonomy, relatedness and competence of employees. It was hypothesized that an innovative leader predicted the perception of innovation culture, and that organizational mechanics that support autonomy, relatedness and competence mediated the influence of innovative leaders to innovation culture. Additonally, given the pervasiveness of family businesses, this research aimed to further determine differences of this relationship of organization leadership, mechanisms supportive of autonomy, relatedness and competence, and the perception of innovation culture in relation to ownership structures. It was hypothesized that there were significant differences between family and non-family firms on innovative leadership, autonomy, relatedness, competence and innovation culture, and that there were differences between family firms and non-family firms on the relationship of innovative leader to innovation culture, and how this relationship was mediated by organizational mechanism that support autonomy, relatedness and competence. A survey was conducted among 510 employees from seven family firms and six non-family firms. The researcher used Structural Equation Modeling to test the hypotheses. Results confirmed that autonomy partially mediated the relationship of innovative leadership and innovation culture, while relatedness and competence had no mediating role. Comparing organizations based on ownership structure, non-family firms were perceived to have more innovative leaders and work culture, and were more likely to have mechanisms supporting autonomy. In both family and non-family firms, autonomy partially mediated the relationship of leadership on innovation culture, while relatedness had no mediating effect. However, competence had a mediating role only in non-family firms. This illustrates that, as much as leaders play an integral role in innovation culture building, employees can be motivated by organizational systems that promote self-determination and competence. On the other hand, for family firms, in building an environment conducive to positive change, it is key for leaders to provide employees the liberty for decision-making, risk-taking and choice. With the prevalence and dominance of family firms in the business environment, understanding innovative culture impacts the organizations’ stakeholders and the industry as a whole.